Wednesday, January 18, 2012

Show Me A Picture Of The Money

In the previous post, we borrowed a graph from Paul Krugman's work which he used to demonstrate the continuing effectiveness of fiscal stimulus, even in the age of globalization.  We also commented that common sense alone would lead to the same conclusion, and that those who made different claims were either out to lunch or had simply given up on the idea of actively using proven policy measures to resurrect a moribund economy.

Today, we present another useful graphic depiction of an aspect of the current economic times, and would add that anyone who has been around long enough to have worked and earned a living over the last thirty-odd years has come to understand this lamentable development on the strength of bitter experience alone. Further, we would append a note indicating that the combination of the two Krugman graphs, and the accompanying explanations, produces an ineluctable conclusion to which we should pay heed. 

Had we not embarked on the blind venture into totally open and unsupervised trade with slave labor, non-democratic nation states over the last three or four decades, we would today be spending much closer to 100% of our dollars on American produced goods, inclusive of the higher end, labor intensive, value added commodities.  This not only strongly implies a much higher GDP over that same period, but also that workers would have been employed in much better paying jobs.

And the widening inequality of income and shredding of the middle-class would not have happened.

Here is the Krugman post:

Things We’re Supposed To Be Quiet About

Apologists for rising inequality often argue that since most Americans’ income has risen despite rising inequality, there’s no reason to complain about inequality other than envy. So it’s worth remembering that we used to expect economic growth to deliver large increases in real income, not just a bit of a rise that’s accomplished in large part through longer working hours; and that a major reason so many have seen such small gains is that a large part of growth has been siphoned off to the very high end.
Lane Kenworthy had a nice chart illustrating both points, comparing median family income with real GDP per family (for those worried about the fine points, it was nominal GDP divided by the CPI, avoiding some technical issues):
You see the contrast: a doubling of family incomes in the post war generation compared with maybe 20 percent since, and family incomes growing in line with GDP before, lagging far behind since, with the difference basically being the rising share of the 1 percent.
This is real stuff, not some trivial envy-driven concern. But we must be very, very quiet about it, right?


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